You have the finances and are ready to make the purchase. However, since all your savings will go into the business, you need to make sure that there are no hidden costs and that you buy a business that is viable. The time to ask questions is before and not after you put your signature on the contract of the sale. Once you buy a business and have paid over the money, you are the owner and responsible for its success.
Below are some of the questions to ask before you buy a business, in order to avoid costly purchase mistakes.
Does the Business for Sale Have Financial Records?
If the owner wants a specific amount for goodwill, then surely there must be financials to substantiate his or her claims. Ask to see the tax clearance certificate, financial statements, and the general record keeping, such as the records on the POS system. When you work through a broker, you are already in a better position to request an analysis of the financials. The inspection enables you to verify claims made by the seller and to determine the profitability of the business for sale.
Why Is the Owner Selling?
Reasons for selling range from other business interests to being too busy to attend to important aspects of the business operations. The person may sell because of poor health or lack of funds to develop the business model. Get to the true reason for selling. This might take some time. The broker already has a good idea of why the owner is selling, but once you are in communication with the owner, you should be able to assess whether the reason given is indeed the truth.
Who Is Leading?
You want to know whether the success of the business is dependent on the seller being involved. If it is a business that is closely connected to the seller, then you might have a difficult time in getting in on the market.
What Approach Is Followed in Generating Income?
Does the strategy involve selling many products at the lowest possible price or does the model entail selling a few products at a higher price? Are you comfortable with the particular business model?
What Is Unique to the Particular Business?
You want to establish whether it has a competitive edge in the particular area and industry. You want to know what sets the products or services apart from that offered by its competitors.
Where Is the Nearest Competitor?
This is important because a car wash could be on the market simply because another one opened a few months ago just one block away. If it is a small town, there may not be enough vehicles to ensure that both businesses can operate profitably.
Where to Get More Information?
Avoid costly buying mistakes by getting all the information you need to make an informed decision. We do the ground work so you don’t have to navigate through the maze of pitfalls. Use our search facility to locate the businesses for sale in our portfolio or give us a call to help you find and buy a business that suits your budget, interest, income needs, and aspirations.